Credible takeaways:
- Refinancing federal loans means you’ll lose access to special protections like income-driven repayment and forgiveness opportunities.
- Once you refinance your federal loans through a private lender, the process is permanent and you can't convert them back into federal debt.
- Consider consolidating federal loans instead to simplify repayment or gain access to forgiveness programs.
Before you decide to refinance your federal student loans, it's vital to understand the long-term implications of this financial decision. This guide explains everything you should know about federal student loan refinancing.
What happens when you refinance federal loans?
Refinancing your education debt requires you to take out a new student loan, often with more favorable terms than your current debt. You can refinance federal student loans, but only with a private lender, as the U.S. Department of Education doesn't offer refinance loans.
This means you would need to take out a private loan from a bank, credit union, or online lender in order to refinance your federal debt. If approved for refinancing, your new lender would work with your old loan servicer to repay your debts. Then, you'll begin making payments on your new private student loan.
Your newly refinanced loan typically will have none of the benefits or perks that are unique to federal student loans, including:
- Access to income-driven payment plans, which limit your monthly payment to a percentage of your income
- Eligibility for loan forgiveness for public service work or after making 20 to 25 years of payments on an income-driven plan
- Eligibility for loan forgiveness or deferment programs that the Department of Education may offer in the future, like the COVID-19 payment pause
- The ability to switch your payment plan as needed, and generous options to pause payments through deferment or forbearance
- Subsidized interest on certain loans when payments are in deferment for a qualifying reason
These benefits generally aren't available on a refinance loan from a private lender.
The Department of Education does offer a Direct Consolidation Loan, which allows you to get a new loan to pay off one or more qualifying federal student debts. However, it’s not the same as refinancing, since you can't lower your interest rate with this method. The rate on your new consolidated loan is just a weighted average of the existing loans you're repaying.
Check Out: Student Loan Consolidation: Is It Right for Me?
Pros and cons of federal loan refinancing
If you're thinking about refinancing, consider both the pros and cons of getting a new private student loan to pay off your federal debt.
Pros of refinancing federal loans
- Your refinance loan may have a lower interest rate than your existing federal debts.
- You can change the repayment term on your new loan — either extending it to lower your monthly payment, or shortening it to pay off your debt faster.
- You can combine multiple loans into one, leaving you with just a single monthly payment to manage instead of several.
Cons of refinancing federal loans
- You’ll lose access to income-driven repayment and other flexible federal repayment plans.
- You’ll no longer be eligible for federal loan forgiveness programs.
- You’ll lose access to the generous deferment or forbearance options offered by the Department of Education.
The biggest pro is that you could potentially get a lower interest rate. Private lenders set rates based on market conditions and your financial credentials, while federal student loan rates are set by law and are the same for every student who borrows at a given time. (Note that different types of federal loans have different interest rates.) Once you have your federal student loan, the interest rate won't change.
If you obtained federal loans with high rates but you can now qualify for lower rates on the private market, refinancing may allow you to get a new loan at a better rate, saving you in interest costs.
Check Out: Should I Refinance My Student Loans?
When NOT to refinance federal loans
You should avoid refinancing federal loans if you plan to take advantage of income-driven repayment or federal loan forgiveness programs, either now or in the future.
Once you’ve converted federal loans to privately refinanced debt, you can't go back. If the government decides to forgive student debt in the future, or pauses payments again due to another national emergency, you will likely not benefit. Likewise, if your income drops or you decide to work for a not-for-profit organization, you won’t have access to income-driven repayment plans or loan forgiveness programs, such as Public Service Loan Forgiveness (PSLF).
You should also avoid refinancing federal loans if doing so would raise your interest rate, as that would make your loan repayment costlier.
When to refinance federal loans
If you can qualify for a refinance loan at a lower interest rate than you’re currently paying and you’re confident you'll never take advantage of any federal benefits and protections, then it may make sense to move forward with refinancing. See what the lenders below can offer you.
4.44.4
Credible rating
Fixed (APR)
4.84% -
Loan Amounts
$10,000 up to total refinance amount
Min. Credit Score
680
Check Rates
on Credible’s website
View Details
Overview
Borrowers who graduated with at least a bachelor’s degree may refinance their student loans with ELFI. Every applicant is assigned a student loan advisor to help guide them through the process.
Students who wish to take over their parents’ PLUS loan may do so by refinancing with ELFI — something not offered by every lender — but spouses can’t consolidate their loans into a single refinancing loan.
Unfortunately, ELFI doesn’t allow borrowers to release cosigners, nor does it offer any rate discounts. However, borrowers who experience financial hardship may be eligible for up to 12 months of forbearance.
Interest rates
Fixed and variable
Minimum credit score
680
Minimum income
$35,000
Loan terms
5, 7, 10, 15, or 20 years for student loan refinancing; 5, 7, or 10 years for parent loan refinancing
Loan amounts
Minimum of $10,000 with no set maximum.
Cosigner release
None
Eligibility
Must be a U.S. citizen or permanent resident with a bachelor’s degree or higher. Must have at least $10,000 in student loans to refinance and a minimum credit history of 36 months.
Read full review
4.64.6
Credible rating
Fixed (APR)
5.24% -
Loan Amounts
$5,000 - $250,000
Min. Credit Score
680
Check Rates
on Credible’s website
View Details
Overview
Founded in 2009, LendKey partners with 300+ community banks and credit unions to connect borrowers with the loans they need. You can compare multiple lenders at once without affecting your credit score.
However, the exact terms and qualification requirements available through LendKey vary depending on your chosen community lender. While you can easily compare options, you’ll need to read the fine print of each offer to make sure the loan offers everything you need.
Interest rates
Fixed or variable
Minimum credit score
680
Minimum income
Does not disclose
Loan terms
5, 7, 10, or 15 years
Loan amounts
$5,000 to $250,000
Cosigner release
Varies based on lender's terms
Eligibility
Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from one of LendKey lenders’ eligible institutions.
Read full review
4.74.7
Credible rating
Fixed (APR)
5.89% -
Loan Amounts
$10,000 - $750,000
Min. Credit Score
Does not disclose
Check Rates
on Credible’s website
View Details
Overview
Citizens offers student loan refinancing to qualifying borrowers who refinance at least $10,000 in student loan debt.
Undergraduate borrowers can refinance up to $300,000 in student loans, while those who borrowed for graduate or professional degrees have higher limits of $500,000 or $750,000. Citizens offers fixed and variable rates and repayment terms between five and 20 years.
If you’re a medical resident, you can refinance your student loans and only pay $100 per month for up to four years while completing your residency or fellowship.
Interest rates
Fixed or variable
Minimum credit score
Does not disclose
Minimum income
Does not disclose
Loan terms
5, 7, 10, 15, or 20 years
Loan amounts
$10,000 minimum, with a maximum of $300,000 for bachelor’s degree or below; $500,000 for graduate degrees; and $750,000 for professional degrees
Cosigner release
36 months
Eligibility
Must refinance at least $10,000 in student loans and be a U.S. citizen, permanent resident, or resident alien with a valid U.S. Social Security number. Must have earned at least a bachelor's degree to qualify.
Read full review
3.83.8
Credible rating
Fixed (APR)
6.00% -
Loan Amounts
$7,500 - $200,000
Min. Credit Score
700
Check Rates
on Credible’s website
View Details
Overview
EdvestinU is a loan program offered by Granite Edvance Corporation and offers affordable rates for refinance loans. Borrowers can refinance federal and private loans, and fixed and variable rate loans are available.
EdvestinU refinance loans are available to residents of about 20 states, and the lender has higher loan minimums and lower maximums than some competitors. Both of these factors limit who can (or might want to) refinance with this lender, but eligible borrowers do have various student loan repayment term options.
Interest rates
Fixed or variable
Minimum credit score
700
Minimum income
Does not disclose
Loan terms
5, 10, 15, or 20 years
Loan amounts
$7,500 to $200,000
Cosigner release
24 months
Eligibility
U.S. citizens or permanent residents who are at least 18 years old and reside in Alaska, Arkansas, Colorado, Connecticut, Florida, Maine, Massachusetts, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Puerto Rico, Rhode Island, Texas, Utah, Virginia, Washington, West Virginia, and Wisconsin.
Read full review
3.93.9
Credible rating
Fixed (APR)
6.15% -
Loan Amounts
$5,000 - $250,000
Min. Credit Score
670
Check Rates
on Credible’s website
View Details
Overview
INvestEd is an Indiana-based nonprofit lender that provides refinanced student loans nationwide. As a nonprofit, INvestEd offers competitive rates as well as an autopay discount. Cosigner release is also available after 12 on-time payments, which is less than many competitors.
However, the maximum refinance limit of $250,000 is below what other lenders may allow. Borrowers must also comply with strict credit and income requirements to qualify, or must have an eligible cosigner. While credit requirements are clearly defined, there’s no way to prequalify with a soft credit check.
Interest rates
Fixed or variable
Minimum credit score
670
Minimum income
Does not disclose
Loan terms
5, 10, 15, or 20 years
Loan amounts
$5,000 to $250,000
Cosigner release
12 months
Eligibility
U.S. citizens or permanent residents are eligible. Borrowers must meet minimum requirements including a FICO score of 670 or higher, annual income of $36,000, a debt-to-income ratio below 40% to 50%, a year of continuous employment, and no defaults or serious collection activities in recent years.
Read full review
44
Credible rating
Fixed (APR)
6.20% -
Loan Amounts
$10,000 up to the total amount
Min. Credit Score
670
Check Rates
on Credible’s website
View Details
Overview
Massachusetts Educational Financing Authority (MEFA) offers refinancing loans to student borrowers — and unlike many other lenders, you don’t need to have earned your degree to qualify. Only fixed-rate loans are available, but the rates are competitive and may be lower than what other lenders can offer. MEFA also doesn’t charge any fees or penalties.
Refinance loans start at $10,000, and you must have made six consecutive on-time payments on the original loans over the most recent six months. If you can’t qualify based on your own credit history, you can add a cosigner.
Interest rates
Fixed
Minimum credit score
670
Minimum income
Does not disclose
Loan terms
7, 10, or 15 years
Loan amounts
$10,000 up to your total debt
Cosigner release
None
Eligibility
Must be a U.S. citizen or permanent resident who is the primary borrower on education debt used to attend an eligible college or university. Must have made six on-time loan payments over the most recent six months. Must have no history of default or delinquency on education debt for the past 12 months and no history of bankruptcy or foreclosure in the past five years.
Read full review
3.73.7
Credible rating
Fixed (APR)
6.34% -
Loan Amounts
$7,500 - $250,000
Min. Credit Score
680
Check Rates
on Credible’s website
View Details
Overview
Founded in 1981, Rhode Island Student Loan Authority (RISLA) is a nonprofit lender that offers refinance loans to borrowers in all 50 states. Though most private lenders require borrowers to have graduated to qualify for refinancing, RISLA also serves borrowers who didn’t complete their degree.
RISLA offers income-based repayment to borrowers in financial distress. Additionally, borrowers may also access up to 24 months of forbearance in the event of financial hardship. Borrowers who return to graduate school may defer repayment on their refinancing loans for up to 36 months.
Interest rates
Fixed
Minimum credit score
680
Minimum income
$40,000
Loan terms
5, 10, or 15 years
Loan amounts
$7,500 minimum up to of $250,000, depending on degree
Cosigner release
None
Eligibility
Borrower or cosigner must meet credit requirements. Student must be a U.S. citizen or permanent resident and have used original student loans to attend an eligible degree-granting institution.
Read full review
All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | SoFi Disclosures | Read more about Rates and Terms
How to refinance federal loans
If you want to refinance your federal student loans, you should start by researching the top refinance companies. Most lenders allow you to get quotes for a refinance loan online. After inputting your financial information, you can see what rate and terms you'd likely be offered from different lenders.
If you can find a good student loan refinance offer and decide to move forward, you'll submit a full application and provide more financial details, including information about the loans you're refinancing.
If approved, your new loan funds will repay your federal debts and you'll begin making payments on the new loan. Be sure to continue paying your federal student loan servicer until the refinance is complete and your balance is fully transferred to your new private lender.
Compare Rates Now
Refinancing vs. consolidation
Remember, private refinancing and federal consolidation are not the same. Refinancing must be done through a private lender, while consolidation can only be done through the Department of Education.
A Direct Consolidation Loan allows you to combine multiple federal debts into one new loan that gives you access to more repayment options, including longer repayment timelines and income-driven repayment for parent PLUS loans. But your interest rate won't change — it will be a weighted average of the consolidated debt. You will retain your federal borrower benefits, though.
Refinancing can change your interest rate, but it's generally better to refinance private loans vs. federal loans, as you will lose access to income-driven repayment plans and forgiveness programs offered by the government for your federal loans.
If you believe consolidating would be better for you than refinancing, check out this guide on how to consolidate to explore this option and determine if it is the right financial choice.
Meet the expert:
Christy Bieber
Christy Bieber has been working full-time as a freelance writer since 2008. She has written blogs, news articles, textbooks, and online courses on the topics of law, finance, and history. She lives with her husband, two children, and beagle.
